Freeserve, an Internet Service Provider in Europe, asked the British government to implement the European directive adopted by a meeting of the European Union (EU) finance ministers last week to force non-EU companies to levy a Value Added Tax (VAT) on European consumers. This would force non-EU Internet companies that sell in Europe to collect the VAT and remit it to the consumer's home government. EU member states will ratify the rules in February 2002, but the implementation deadline has yet to be determined.

Rates for VAT in the EU range from 15 to 25 percent. These taxes are included in the retail price of the goods, tending to make them more expensive than U.S. products. This angers many European firms because they believe that the U.S. is competing unfairly with them.

BOB'S OPINION
The American Internet companies escaped being tax collectors for the U.S. states by a hairbreadth. They could end up in the position of being legally obligated to collect taxes for the European Union members. The Value Added Tax is a particularly insidious tax because it is totally concealed from the buyer. It is an incremental tax on top of the list price that creates a new list price that is 15% to 25% higher, whereas the sales tax is out in the open.

It is long past time for the governments of the world to realize that the Internet has no parochial state or sovereign boundaries. Businesses should not be the tax collectors for the government. Taxes are a necessary evil and should be openly collected by governments in their own sovereign territories only.

USER COMMENTS 18 comment(s)

Economics(12:16pm EST Fri Dec 21 2001)>>. Taxes are a necessary evil and should be openly collected by the government in their own sovereign territories only.

so what you are saying is that consumers should buy ONLY from out of coutry/state vendors… If this happens.. out society will not be able to afford regular stores… they will NOT be able to compete. Why should online retailers have a advantage over a business that has to buy/rent a storefront?

- by Go

Hmmmm(12:25pm EST Fri Dec 21 2001)I think that Online retailers should have to charge all customers the same. If I live in TX and I buy something from CO I should get charged the taxes for CO all the way down to city and county sales tax. This keeps the taxes coming in. I think it is unpractical to ask a company to send taxes all over the country and with this all over the world. - by CB

Re: Hmmmm(12:39pm EST Fri Dec 21 2001)Then online companies would do exactly what the credit card companies did — move to the place that offers them most economic benifit. - by Patrick

I agree(12:40pm EST Fri Dec 21 2001)I agree with CB. If taxes are going to be charged for online purchases, they should be charged based on where the originating company is located, not where the purchaser is.

Of course, this would encourage internet retailers to relocate to locales without sales tax, but if a state became popular with internet retailers, it would soon be eyed by the local legislature as a potential revenue stream, so I doubt we would see a massive flight to sales tax free states. - by Lonnie M.

That's capitalism for you…(12:45pm EST Fri Dec 21 2001)“Why should online retailers have a advantage over a business that has to buy/rent a storefront?” Hmm, maybe because they developed a unique and advantageous business model. It's not their fault they are simply cutting their loses using a less expensive technique, sounds like the American way to me! If storefront businesses can't compete tough sh*t, retail is not charity.- by Russ

And don't forget…(1:07pm EST Fri Dec 21 2001)…at least from a consumer's view, there is already an extra built “tax” on anything bought on the Internet – the delivery charges. This provides for more jobs in the transport industry but also provides a way to level the playing field (somewhat) with the stonefronts. Of course, for that information that can be download…while don't get me started. Because, I am just sorry but in my heart I truly believe that information must be….. - by FREE!!!

shipping(1:13pm EST Fri Dec 21 2001)By the time that you have to pay to have a 250lb. television shipped you will wish that you had just gone down to your local Best Buy and forked out the sales tax. This is an area where I have a hard time competing with companies like that. - by threefires

Dear Go(1:20pm EST Fri Dec 21 2001)I don't suppose you have noticed that there are other forms of taxation, in addition to sales tax?

Gratned, I don't like *any* form of tax, but some of them are necessary and reasonable. Taxes on vehicle fuels help pay for the roads, and no one is going order a tank of gas over the Internet. Income tax is a major pain, but it's easy to force employers to collect it. There are taxes on airport usage (you may never notice them, because they're collected by the ticket agent as part of the ticket price.

Eliminating VAT/GST/Sales tax would eliminate the need for tax regulation of the Internet – and make the actual taxation much more visible, which is why dishonest politicians (there's a redundant label for you) prefer to use point-of-sale taxes they can pretend to help the consumer by lowering the the visible taxes, while raising the hidden taxes by twice the amount. - by Icesnake Frostfyre

What about Customs?(1:22pm EST Fri Dec 21 2001)Could the destination country levy an import tariff on items? This seems to be the easy way out for the EU and on-line resellers.

Of course, having businesses (esp. foreign) figure out the exact tariff for each little thumbnail of a country in Europe would be disasterous at best. I think the EU should either PUT UP or SHUT UP – ie. UNIFY and become a Euro-US, that way they can charge ONE tariff and everyone is happy (except the consumer, but screw them they need all of their wealth confiscated^W taxed anyway).

OK, so that last bit was sarcasm…

Just my $0.02 worth,- by myrkat

taxes(2:00pm EST Fri Dec 21 2001) Taxes are generally for the benefit of the “local” area residents, the city, state, province, or country. (etc) Why have taxes at a retail sales level anyway? Do it directly via property taxes, income taxes, or other means that is directly matched to the residents? Why should I have to pay the VAT and then claim a refund when I as a tourist/traveler make a purchase in the UK? It's because most travelers don't want to be bothered with the hassel of claiming a refund, and the local residents thereby gain the benefit of taxes paid by someone that doesn't gain a direct benefit. Same in just about every other country/area I have been in that taxes retail sales. Yes, I know retail sales taxes are often directly related to certain expenses, like gasoline taxes being used for the maintenance of the local roads. But it is equally possible to put a surtax on the property taxes of a gas station to accomplish the same result (zoning bylaws) or tax the gross income of the station. Likewise there are other possibilities for every other “usage” based tax currently implemented as retail sales tax. Level the playing field, eliminate the hidden taxes. - by Tired of taxes

I have a solution…(2:06pm EST Fri Dec 21 2001)…get the G8 and the WTO together and ban all tax on sales, goods, and individual. Tax corporations only and evenly. This lowers the number of entities taxed, so it lowers the cost of collecting the taxes. But what I have not worked it how to be it even across the world so all of the jobs don't end up in Outer Slowbonia because that have the lowest taxes. Mmmm.

A Canard(10:19pm EST Fri Dec 21 2001)>>> Why should online retailers have a advantage over a business that has to buy/rent a storefront?

For the same reason that stores that border sales-tax-free states can't demand that they pay taxes. I live very close to the border between Pennsylvania and Delaware. Oddly enough, southern PA still has retail in spite of tax-free stores just on the other side of the border. Imagine that!

There is ALWAYS variations in taxes. We should not open the Pandora's box of having foreign law apply on US soil, virtual or otherwise. VAT is just the foot in the door.

- by Tamer

I have an evil idea…(3:23pm EST Sat Dec 22 2001)The government should force all the companies to collect sales tax basied on where the company is and where the purchaser is. Nice simple, hideous idea that will be coming to politicans near you. - by

What are you smokin'(5:10pm EST Sat Dec 22 2001)To the guy that thinks that an Internet retailer ought to collect taxes all the way on down to the county, etc. – I have to say that I can smell what you're smokin' all the way over here… You obviously have never dealt with the State of Ohio. That wonderful state with 52 different SALES taxing bodies. 52 bodies that update their tax rates, oh, maybe 3 or 4 times a year… All at different times… So each month, you're fucking around with taxes. You have to track what COUNTY you sent this crap to, how much you sent, and the taxes due! Blech!

It's a pain in the ass when you have a presence in the state and are obligated to do it, but to hoist that crap onto an Internet retailer – for ALL 50 states, each with lots of counties (say 200 in Illinois), and cities, etc. and you're just nuts if you think that a small Internet retailer could compete with a bookstore in NH…

If I've got to pay taxes, fine – make them fair. And as a retailer, make it easy for me to do – MAKE THEM THE SAME THROUGHOUT THE ENTIRE COUNTRY FOR THE INTERNET! Go ahead and play with the rest of them, I could care less – but keep them the same for the Net – you won't get any complaints, and you'll get your money. - by Shut up or put up

US imposes income tax on EU(12:51am EST Mon Dec 24 2001)By tracking and collecting VAT tax for EU companies, US companies would be providing a service that has a taxable value under US law. This means that the EU companies would owe US income tax.

Of course, we fully expect the EU to collect said income tax and deliver it to the US.- by MrX_TLO

In all seriousness….(12:56am EST Mon Dec 24 2001)It's called protectionism. If they want to put an 25% surcharge on US sold goods and then force us to collect it for them. We can just respond in kind, putting a 30% import duty on all their goods and we buy alot more of their stuff than they do of ours.- by MrX_TLO

A yoke!(6:35pm EST Mon Dec 24 2001)Thats another example of politicians who just can't figure out how computers or the Internet works.They think they can fit the Internet into on of their cupboards, by saying thing like: “Oh, we simply charge a cent for the KB transferred, that will give us more money to work with” or “Oh, we simply say encryption is illegal, except if we own a master-key, and that will solve all the problems in the whooole world” or the things in your example.

But don't be angry, they are just politicians, they have no clue, they are overpaid and can not be fired, they come from a very small town and worked their way up right to the top: smalltowners in big business, just a mess. - by MrKnowsSth